test_cds.cpp

#include <ql/qldefines.hpp>
#include <ql/time/date.hpp>
#include <ql/instruments/creditdefaultswap.hpp>
#include <ql/pricingengines/credit/isdacdsengine.hpp>
#include <ql/termstructures/credit/piecewisedefaultcurve.hpp>
#include <ql/termstructures/credit/defaultprobabilityhelpers.hpp>
#include <ql/termstructures/yield/piecewiseyieldcurve.hpp>
#include <ql/termstructures/yield/ratehelpers.hpp>
#include <ql/time/calendars/weekendsonly.hpp>
#include <ql/time/daycounters/thirty360.hpp>
#include <ql/time/daycounters/actual365fixed.hpp>
#include <ql/time/daycounters/actual360.hpp>
#include <ql/currencies/america.hpp>
#include <ql/quotes/simplequote.hpp>
#include <boost/make_shared.hpp>
#include <iostream>
#include <iomanip>

using namespace QuantLib;

void example() {

    // this is the example from Apdx E in pricing and risk management of CDS, OpenGamma

    Date tradeDate(29, December, 2017);

    Settings::instance().evaluationDate() = tradeDate;
    std::vector<double> depositRates = {0.015678, 0.016219, 0.016947,
                                        0.018436, 0.021063};
    std::vector<int> tenors = {1, 2, 3, 6, 12};
    std::vector<boost::shared_ptr<RateHelper> > isdaYieldHelpers;
    int i = 0;
    for(auto r: depositRates) {
        isdaYieldHelpers.push_back(
            boost::make_shared<DepositRateHelper>(r, tenors[i] * Months, 2,
                                                  WeekendsOnly(), ModifiedFollowing,
                                                  false, Actual360()));
        i++;
    }

    // this index is probably not important since we are not using
    // QL_USE_INDEXED_COUPON - define it "isda compliant" anyway
    boost::shared_ptr<IborIndex> libor3m = boost::make_shared<IborIndex>(
        "IsdaIbor", 3 * Months, 2, USDCurrency(), WeekendsOnly(),
        ModifiedFollowing, false, Actual360());

    std::vector<double> swapRates = {0.020825, 0.02176, 0.02227,
                                     0.022625, 0.02298, 0.02335, 0.023555,
                                     0.02385, 0.024145, 0.02452, 0.025025,
                                     0.02536, 0.025455, 0.02546};
    std::vector<int> swapTenors = {2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 15, 20, 25, 30};
    i = 0;
    for(auto r: swapRates) {
        isdaYieldHelpers.push_back(boost::make_shared<SwapRateHelper>(
                                       r, swapTenors[i] * Years, WeekendsOnly(), Semiannual,
                                       ModifiedFollowing, Thirty360(), libor3m));
        i++;
    }

    // build yield curve
    Handle<YieldTermStructure> isdaYts = Handle<YieldTermStructure>(
            boost::make_shared<PiecewiseYieldCurve<Discount, LogLinear> >(
                0, WeekendsOnly(), isdaYieldHelpers, Actual365Fixed()));
    isdaYts->enableExtrapolation();


    CreditDefaultSwap::PricingModel model = CreditDefaultSwap::ISDA;
    boost::shared_ptr<CdsHelper> cds6m(new SpreadCdsHelper(
        0.0248, 6 * Months, 1, WeekendsOnly(), Quarterly, Following,
        DateGeneration::CDS2015, Actual360(), 0.4, isdaYts, true, true, Date(),
        Actual360(true), true, model));
    boost::shared_ptr<CdsHelper> cds5y(new SpreadCdsHelper(
        0.0248, 5 * Years, 1, WeekendsOnly(), Quarterly, Following,
        DateGeneration::CDS2015, Actual360(), 0.4, isdaYts, true, true, Date(),
        Actual360(true), true, model));
    std::vector<boost::shared_ptr<DefaultProbabilityHelper> > isdaCdsHelpers;

    //isdaCdsHelpers.push_back(cds6m);
    isdaCdsHelpers.push_back(cds5y);

    // build credit curve
    Handle<DefaultProbabilityTermStructure> isdaCts =
    Handle<DefaultProbabilityTermStructure>(boost::make_shared<
        PiecewiseDefaultCurve<SurvivalProbability, LogLinear> >(
            0, WeekendsOnly(), isdaCdsHelpers, Actual365Fixed(), 1e-12));

    // set up isda engine
    boost::shared_ptr<IsdaCdsEngine> isdaPricer =
        boost::make_shared<IsdaCdsEngine>(
            isdaCts, 0.4, isdaYts);

    // check the curves
    std::cout << "ISDA yield curve:" << std::endl;
    std::cout << "date;time;zeroyield" << std::endl;
    for (Size i = 0; i < isdaYieldHelpers.size(); i++) {
        Date d = isdaYieldHelpers[i]->latestDate();
        Real t = isdaYts->timeFromReference(d);
        std::cout << d << ";" << t << ";"
                  << isdaYts->zeroRate(d, Actual365Fixed(), Continuous).rate()
                  << std::endl;
    }

    std::cout << "ISDA credit curve:" << std::endl;
    std::cout << "date;time;survivalprob" << std::endl;
    for (Size i = 0; i < isdaCdsHelpers.size(); i++) {
        Date d = isdaCdsHelpers[i]->latestDate();
        Real t = isdaCts->timeFromReference(d);
        std::cout << d << ";" << t << ";" << isdaCts->survivalProbability(d)
                  << std::endl;
    }
    Schedule cdsSchedule(tradeDate + 1, Date(20, December, 2022), 3 * Months, WeekendsOnly(), Following,
                         Unadjusted, DateGeneration::CDS, false, Date(), Date());

    Real nominal = 10000000;
    Date upfrontPaymentDate = WeekendsOnly().advance(tradeDate, 3 * Days);
    CreditDefaultSwap trade(Protection::Buyer, nominal, 0., 0.01,
                            cdsSchedule, Following, Actual360(), true, true,
                            tradeDate + 1, upfrontPaymentDate,
                            boost::shared_ptr<Claim>(),
                            Actual360(true));
    trade.setPricingEngine(isdaPricer);
    std::cout << trade.fairUpfront() * nominal << std::endl;
    std::cout << trade.NPV() / isdaYts->discount(upfrontPaymentDate) << std::endl;
}

int main() {
    example();
    return 0;
}